Fertilizer Markets and Finance

Worldwide reserves of potash could surpass demand by 59% to 100% by 2020, says the latest report published by Rabobank, a by Netherlands-based global financial service.

The report, “Playing the Potash Field”, adds that the North American potash consortium Canpotex and its European counterpart BPC won’t sit back and watch while new players inject additional quantities of the fertilizer into the global market.

One of the key variables, according to Rabobank, will be the degree to which Brazil, India and China – collectively were responsible for 40% of total potash imports in 2011 – are prepared to endure uneconomic projects to secure supplies either domestically or by investing in overseas developments.

“In the end, it is mainly geopolitical and long-term strategic security parameters that justify such investments,” Rabobank analyst Dirk Jan Kennes said in a statement. ”From a pure economics angle, many of these investments might render losses if prices come under pressure due to oversupply,” he added.

An additional issue is the ability of producers to secure financing for their mines, which is more of a problem for small players than for major ones, says Rabobank.

Although the institution doesn’t see this as a problem for the mining giants, it says it could affect the prospects of projects by smaller companies, many of which will struggle to secure financing for capital expenditures of at least $1,000 per tonne of capacity.

Read more at Mining.com